Siemens interview: Peter Loescher

Running Europe’s largest engineering conglomerate is a tough job in normal times let alone during a lingering global financial crisis. A five-kilometre run every morning gives Peter Loescher the head start he needs to run a company that operates in more than 200 countries and employs more than 360,000 people.

Loescher came to the company at a time of a corruption controversy that cost it $1.6bn in fines and had tarnished the Munich-based firm’s 160-year history — an environment he has cleaned up and put behind Siemens. Since his appointment in 2007, Loescher, 55, the first outsider at the helm of the firm, has tried to reinvigorate life back into the company by aligning its strategy with what he calls “mega trends,” a reference to the green business segments of the firm and its global positioning. Last year, the company reaped $43.8bn, or 42 percent of its global sales from its green portfolio. That sum is a ten percent increase over the previous year.

Driving change in a company with an entrenched corporate culture like Siemens isn’t easy. But the former General Electric and Merck executive has been steadfast in pursuing the transformation of the firm, aiming to increase its annual revenue to $132.8bn this decade from about $103.6bn.

“You have to have a long-term strategic approach for the company,” Loescher says in an interview with Arabian Business. “You have to respect values which have grown over 160 years. I came into the company and said Siemens doesn’t need a revolution but an evolution, but fast in terms of speed. And this is precisely what we did, rebuilding a fantastic leadership team, leveraging the cultural aspects of our global teams.”

That strategy has meant reducing the company’s exposure to manufacturing dips, focusing on automation and keeping Siemens lean. As the global economy remained sluggish in 2012, and as Europe slid into recession while the Chinese and Indian economies slowed, Siemens announced $7.98bn in cost-cutting measures at the end of last year.

“You have to take advantage of crises. I always said don’t miss a good crisis and we certainly didn’t miss ours when I arrived,” Loescher says. “Do the right and necessary steps and stick to them and not try to maximise short-term quarterly profits. Link them back to long-term sustainable development in terms of strategic directions and putting measurements in place for higher operational performance in the short term.”

In October, the company modified its business strategy, restructuring its renewable energy segment and divesting its solar power activities to focus on wind and hydro power. Lower growth and strong price pressure made the solar markets business unsustainable. Some critics say the company’s restructuring plan isn't creating enough value and that it is focused too heavily on trying to buy margins and sales when Siemens already has a number of businesses it could improve on. Their argument is that the firm is missing an opportunity to raise those margins.

The company, which, in many ways, is a bellwether of Germany’s economy and the industrial sector in Europe has weathered the worst of the global financial crisis and is on a solid footing to perform well, says Loescher. It, along with other mighty German corporate powerhouses, has helped the country secure its place as the world’s second-largest exporter after China in 2012.

“We have significantly increased our earnings capacity,” he says. “During the crisis we grew three times as much as the global GDP. We have demonstrated and enhanced the growth profile of the company. We are well positioned strategically, [we make a] higher performance level and don’t miss a crisis.”